Thread by @faisalislam

Covid has led to an “expansion of the role of the state that goes against our instincts”

PM says “continuing furlough forever” keeps “people in suspended animation” and says Opposition sees state expansion as welcome and wants to spend “half our national income”...

Notably small reference to Brexit - eg no mention of no deal/ Australian terms etc.

PM paints vision of a cosmopolitan country in charge of its own fisheries and laws, where you use a “blue Brexit passport” having jetted in on a low carbon jet and get an EV taxi.

Trying to get details on 95% mortgage guarantee push...

“Fix broken housing market”...“transforming sclerotic planning ... not enough”

Giving chance for young first time buyers to take long term fixed rate mortgages up to 95%, vastly reducing deposit... could create 2m more o-o

Given that the mortgage market in recent months has seen the rates paid on low deposit mortgages spike up, products withdrawn, as interest rates have been cut to record lows - difficult to see how this is achieved without significant state guarantees, as occurred in US etc...

Eg 95% LTV 2 year fixes (BoE data) have shot up just in past few weeks, as banks fear risk of default amid rapid rises in unemployment particularly amongst those with low deposits and high chance of capital loss. Despite record lows in base rates, rates here up 1% on last year

Not the case even with 75% LTVs... up a bit, 0.2%, but where they were a year ago...

pretty much the most difficult time that could be imagined to oblige the banking sector to take on capital loss risk- property prices just spiked thanks to stamp duty cut/ pent up demand, but rapid rise in unemployment on way.

Fiddling with risk weights/ stress tests not enough.

Government will have difficulty telling banking sector BOTH to extend mortgage holidays and forgiveness, and simultaneously lend into the riskiest part of the market at especially risky time. Especially without widespread guarantees...

If its 2 million people, & average size of a first time buyer mortgage is £185,300 - and market currently serving 75% LTV and below with cheap rates, but not 95% - back of the envelope, that’s several tens of billions of guarantees to cover possible losses...

Acknowledgement in Government that this is more than changing Bank of England stress tests (which oblige banks to set aside more capital to cover 95% mortgages), working with banks on proposals, and on timing.

State guarantees certainly not ruled out.

Which point out that there is already a 95% 15 year mortgage available from Virgin... though the rate is 4.58%, vs 3 ish per cent at lower LTVs.

That’s other problem, on demand side, within the fixed period say after 5-10 years, borrowers would surely want freedom to lower rates